Short Sales

What is a Short Sale? 

Short sale is when the net proceeds of a property sale does not cover all debts that liens have secured against that property. Meaning, is selling a property at a price less than what the current owner owes. 

For instance, the amount owed by a homeowner can be $650,000 on a mortgage. However, the value of the home in question can be $500,000. As such, there is a negative equity of $150,000. 

​

Why would a bank agree to a short sale?

Well, despite that it seems that they are in the 'house business', lenders are in more a money business.

They are not interested in owning homes. When a lender takes a property back and forecloses it, the property is considered a non-performing loan.  

Hence, this financial operation is well-seeing to banks or lenders because it avoids repossessing properties through foreclosures. The foreclosure process is time-consuming and expensive. On the other hand, this sale enables the sellers to avoid a negative hit on their credit score that a foreclosure causes, as well as the bankruptcy that accompanies it in some cases.

 

What is the Short Sale Process? 

The process of a short sale can be divided down into nine steps as follows: 

Step 1: Send the Sender Authorization 

Step 2: Follow Up and Request a Short Sale Package 

Step 3: Complete the Short Sale Package 

Get all documents that the foreclosure lender requires. Generally, it’s wise to collect all documents necessary from the property owner before you initiate the short sale process.

In most cases, the short sale process requires the following documents: 

• Comparable sales 

• Offer overview or the letter sent to the lender 

• Cost estimate for repair 

• Hardship letter for the sale 

• Financial statement of the borrower 

• Income proof of the borrower 

• Sale explanation and offer 

• Savings and checking account statements 

• Sale and purchase agreement 

• HUD 1 settlement statement

• Buyer’s proof of funds letter 

• Power of attorney 

​

Step 4: Submit the Short Sale Package to the Lender 

Step 5: Follow Up on Short Sale Package Receipt 

Step 6: Schedule a BPO or Appraisal for the Short Sale

Step 7: Educate Your Evaluator 

If you don’t get a good deal or if you get a too high BPO/appraisal, the sale can end instantly. However, you can schedule an appointment with the appraiser or BPO agent and set up a meeting at the property. 

Step 8: Start Negotiations with the Loss Mitigator 

After reviewing the BPO/appraisal with the sale document and current offer, the mitigator can decline, accept, or counter your offer. 

Step 9: Short Sale Acceptance